In Healthcare, It’s Public/Private vs. Private/Public

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Consider two healthcare plans sponsored by the federal government:

  • Plan A depends on private insurers. Liberals think a public option should be added to the mix in order to discipline the private market. Conservatives oppose a public option.
  • Plan B is already a public insurance scheme. Conservatives think private insurers should be added to the mix in order to discipline the public sector. Liberals aren’t especially keen on the idea.

Question: is there anything odd or hypocritical about this? I don’t see why. In broad terms, liberals prefer the public allocation of healthcare, and given any particular starting point they’ll argue for greater public participation. Conservatives are just the opposite: they prefer the private allocation of healthcare, and given any particular starting point they’ll argue for greater private participation.

Why bring this up? Because Plan A is Obamacare. Plan B is Medicare. When Obamacare was being debated, liberals argued in favor of a public option to discipline the private market. Plan B is Mitt Romney’s proposal for Medicare, which conservatives favor as a way of disciplining the current public plan.

This all comes from Austin Frakt, who also points out that liberals sometimes argue that Medicare would experience adverse selection (i.e., all the really sick people being shunted into the public plan) if private plans were allowed to compete. Conservatives ignore this argument. It’s pretty much the opposite when the subject is Obamacare: conservatives occasionally bring up adverse selection concerns and liberals mostly ignore them.

Again: is this hypocritical? I guess so. But on a scale of 1 to 10, I’d rate it about a 3. Liberals mostly prefer an entirely public plan, similar to the national healthcare plans in Europe, so they highlight arguments in favor of it while soft-pedaling possible issues during the transition. Conservatives do the opposite. Diogenes would be more meticulous about this kind of thing, I suppose, but most of the rest of us aren’t quite ready to adopt his rigorous standards yet.

And it’s worth noting that this really is a transition problem. A fully public system has no adverse selection issues, and neither does a fully private system. What’s more, in a mixed system, adverse selection problems can actually accelerate the transition to a fully public or private system, which means that proponents might welcome them as politically useful. That’s not something you can actually say in public, though.

Anyway: Mitt Romney wants private insurers to compete with Medicare. I’m actually OK with that in principle: as Austin reminded me last week, there’s evidence that competitive bidding for Medicare contracts could lower costs by around 8% in urban areas that have lots of providers. That won’t save the republic, but it’s nothing to sneeze at either.

At the same time, private insurers already compete with Medicare. It’s called Medicare Advantage, and so MA has mostly fallen flat: it costs more than traditional Medicare and provides only slightly better benefits. Romney hasn’t yet explained how his version of MA is going to be better than the current version of MA, and until he does I don’t see much reason to be interested in his proposal as anything more than boilerplate rhetoric to demonstrate that he’s a free market kind of guy.

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